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Debit Study: Interchange Rule Affected Regulated, Exempt Issuers

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HOUSTON (7/11/13)--Debit-card issuing financial institutions experienced continued growth in their debit business, but both regulated and exempt issuers saw decreases in their interchange revenues since regulations enforcing the Dodd-Frank Act capped that revenue, according to the 2013 Debit Issuer Study commissioned by PULSE.
 
The cap on interchange rates reduced the debit interchange revenue for issuers with at least $10 billion in assets--the "regulated issuers." The average rates declined by 59% for signature debit transactions--to 23 cents from 52 cents on average--and by 32% for PIN debit transactions--to 23 cents from 32 cents--since the regulations went into effect, the study found.
 
Although "exempt issuers" with less than $10 billion in assets--which includes most card-issuing credit unions--are not directly subject to the interchange cap, they, too, have seen average interchange rates decline. Exempt issuers in the study cited competitive dynamics as a cause of the two-cent decrease in their average rates for both signature and PIN debits, said PULSE's report.  What's more, one in three exempt issuers in the study said they expect further declines in debit interchange.
 
The findings support the position of the Credit Union National Association, which has said that although credit unions and other financial institutions are not subject to the regulation, they would be impacted by the interchange-fee limit. If the total fee were reduced by $1.2 billion--a number that was central to a settlement Visa and MasterCard negotiated in an antitrust lawsuit--credit unions with card programs would lose about $50 million in total revenues--or 0.5 basis points of their total assets, CUNA said (News Now Nov. 12).
 
The interchange revenue allows credit unions to provide cost-effective, essential card services to their members. Any reduction in revenue credit unions experience essentially will not find its way to consumers' pockets but is more likely to end up in merchants' cash registers, CUNA said (News Now Nov. 12).
 
Other findings of the study indicated that both regulated and exempt issuers are making fundamental changes to their debit businesses in response to the debit interchange revenue reduction.  Among the most common actions are:
  • Reducing debit operating costs to better align costs with debit's new revenue proposition;
  • Reducing fraud to support the cost-containment goal and to qualify for the fraud prevention payment outlined in Regulation II;
  • Adjusting their overall demand deposit account product structures to either grow the financial institution's wallet share with a particular type of account holder or direct account holders to accounts that generate more revenue or have lower service costs; and
  • Restructuring or eliminating traditional issuer-funded debit rewards programs--40% of the regulated issuers terminated or restructured their programs in 2012).
As for growth, issuers experienced a 14% increase in PIN transactions and a 6% jump in signature transactions. When asked about their outlook for 2013, issuers were more cautious: they projected smaller growth levels this year, with PIN volume forecast to increase by 8% and signature transactions by 4%.

Tony Hayes, a partner at Oliver Wyman and co-leader of the study, noted that this is the lowest growth projection for signature debit seen since the study began.

CU System Briefs (07/11/2013)

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  • FARMERS BRANCH, Texas (7/11/13)--Cornerstone Credit Union League--the new league that combined the Arkansas, Oklahoma and Texas leagues--will be conducting meetings in Arkansas and Oklahoma to discuss the benefits and services the league will provide, according to the Leaguer (July 10). Credit unions will meet July 29 in Oklahoma City, July 30 in Tulsa, Okla., Aug. 7 in Little Rock, Ark., and Aug. 8 in Fort Smith, Ark. ...
  • WYOMING, Pa. (7/11/13)--The former CEO of United Food And Commercial Workers Local 1776 FCU has filed an appeal to her conviction on charges that she generated four checks totaling $1,342 from credit union business accounts to pay dental bills for her husband (The Times Herald July 10). In papers filed in Montgomery County Court, Anne L. Clyburn maintained that there was insufficient evidence to support Judge William R. Carpenter's ruling on misdemeanor charges of theft and tampering with records and felony charges of unlawful use of a computer in connection with incidents that allegedly occurred in 2004. Clyburn previously served nearly a year in state prison for an earlier conviction related to the same charges. Under Carpenter's ruling, Clyburn was given credit for time served ...
  • SAN ANTONIO (7/11/13)--Generations FCU in San Antonio has partnered with the George Gervin Youth Center in a student summer jobs program. The Gervin Summer Learning Program provides more than 70 San Antonio-area high school students with summer jobs, where they learn career development skills and general workplace etiquette. GFCU provides the students with financial education. The classes teach students to save the money they worked hard to earn. This is the second year that GFCU has partnered with the Gervin Center.  At the outset of the summer, students are provided a GFCU checking account and savings account. Their paychecks are direct deposited into their accounts with 80% going into a checking account and 20% going into a savings account. Gervin students who participate in the program also receive a Gervin Youth Center Debit Card that features famed San Antonio Spurs Shooting Guard, George Gervin (Leaguer July 10) ...

CUNA, Coopera Celebrate Four Years Of Alliance

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DES MOINES, Iowa (7/11/13)--Coopera and the Credit Union National Association are celebrating four years of a strategic growth alliance to help credit unions expand their Hispanic market outreach efforts.

Since the alliance formed in 2009, both organizations have leveraged each other's strengths--Coopera's Hispanic market expertise and CUNA's extensive resources--to help America's credit unions grow membership opportunities by reaching and serving Hispanics. Coopera is a full-service Hispanic market solutions company with specific focus on credit unions nationwide.

"By working together, Coopera and CUNA have truly been able to positively influence the growth and direction of the credit union industry," said Miriam De Dios, Coopera CEO. "As a testament to this, our organizations have been able to reach more than 200 credit unions with our collective resources, and in turn, those credit unions have been able to serve thousands of Hispanic members with our help. These results prove how instrumental this alliance has been to those credit unions we have served to date."

Through the strategic alliance, Coopera and CUNA launched specialized resources and programs, including:
  • El Poder es Tuyo, a member-facing, Spanish-language website designed to improve financial literacy;
  • On-demand training courses;
  • Spanish seminar-in-a-box kits;
  • Free educational webinars;
  • Hispanic online resource portal; and
  • Social media efforts, including a special discussion group on LinkedIn.  
In celebration of four years working together, Coopera and CUNA have focused on implementing several initiatives this year, including:
  • Conducting a pre-conference workshop in partnership with the National Federation of Community Development Credit Unions for the 2013 America's Credit Union Conference (ACUC);
  • Celebrating Coopera Founder Warren Morrow as this year's Credit Union Hero through Credit Union Magazine at ACUC;
  • Planning an emerging markets-focused educational track, in partnership with the federation, for the Community Credit Union and Growth Conference;
  • Launching the Warren Morrow Hispanic Growth Fund through the National Credit Union Foundation to provide grants for credit unions to serve the Hispanic community; and
  • Developing a new product line of culturally relevant promotional items credit unions can use as community giveaways for Hispanic-member outreach.    
Coopera and CUNA continue to plan new collaborative projects for the future, said Mark Condon, CUNA senior vice president.

"As the credit union industry evolves, our partnership with Coopera will continue to play a critical role in helping credit unions thrive," said Condon. "Our efforts will continue to focus on co-developing and launching new resources for credit union leadership and staff, as well as building awareness of opportunities with the Hispanic market through participation in industry conferences.

"We will also continue to work together to provide the information and resources credit unions need to keep up with important industry changes, like impending immigration reform, remittance regulations and more," he added.

HERO Contest To Mark CU Valor In Aiding Members

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WASHINGTON (7/11/13)--The National Cooperative Business Association has created an Honor a HERO contest to mark cooperative and credit union valor in aiding members.

The nationwide campaign to search for a HERO provides a public venue for a cooperative or credit union employee--or the business itself--to share a compelling story about helping members/consumers in financial distress and, in turn, helping them to help themselves.

"This is a fantastic campaign that we are proud to launch to inspire cooperatives to act boldly and to empower consumers across our country," said NCBA CLUSA President/CEO Mike Beall. "As the largest group of cooperatives, credit unions have an opportunity to inspire great change in their members' lives. Co-ops and their employees do amazing work each and every day. This is a chance for these stories to be shared, for these heroes to receive recognition and to revitalize our communities. We want to highlight their stories."

In 200 words or less, credit unions and other co-ops can tell how they are a member of their staff or have been a HERO to:
  • An individual;
  • A cause in their area; or
  • Their community.
The campaign began June 24 and runs to Aug. 24. Written entries can be sent to the resource link below. Winners will be announced in early September.

The campaign stems from the new HERO Counseling service, a Community Development Certified Financial Counseling course certified by the NCBA CLUSA. HERO Counseling will help credit unions provide better financial guidance to their low-income communities--becoming HEROES to their members, board, and bottom line, said NCBA CLUSA.

Stories to help inspire others and announcement of winners will be posted at HERO Counseling on Facebook.

The winning credit union receives HERO Counseling staff training, certification and software--from CU Strategic Planning and NCBA CLUSA for the entire credit union staff. Second and third runners-up receive HERO Counseling training for their department or branch of choice.

Top 10 News Now Articles for June

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MADISON (7/11/13)--An article about the release of the Senate Finance Committee's "tax options" paper on exempt organizations--with the elimination of the credit union tax status written clearly in black and white as a reform option--was the most-read News Now article in June.
 
The Top 10 articles for the month included:
 
10. CUNA Refutes Banks' Tax Attacks In Hill, White House Letters
 
WASHINGTON (6/27/13)--Credit Union National Association President/CEO Bill Cheney Wednesday called it "offensive" that representatives of banks and thrifts, "which time and time again have needed taxpayer funded bailouts," have gone to top policy makers to say that "the government can no longer afford the credit union tax status." Cheney fought off the most recent bank attacks in letters to President Barack Obama and to Senate Finance Committee and House Ways and Means Committee leaders.
 
9. Cheney Report: CUs Concerned About Call Report Changes
 
WASHINGTON (6/10/13)--Credit unions are concerned that a rule going into effect June 30 that changes how credit unions define delinquent loans in call reports could drive up the number of reportable loans for some credit unions, Credit Union National Association President/CEO Bill Cheney said in the most recent issue of The Cheney Report.
 
8. Loan Participation Rule Goes Into Effect July 25
 
WASHINGTON (6/26/13)--July 25 is the effective date of the National Credit Union Administration's final rule on loan participations, which implemented a number of improvements, sought by the Credit Union National Association, from the original proposal.
 
7. NCUA Issues Guidance On Credit Rating Rule
 
ALEXANDRIA, Va. (6/20/13)--Supervisory guidance on a National Credit Union Administration rule regarding the use of credit ratings by natural-person credit unions has been sent to federal examiners and credit unions by the agency.
 
6. ACUC Attendees To Storm Today Show Wednesday
 
MADISON, Wis. (6/27/13)--A group of Credit Union National Association representatives will "storm" the set of the Today show Wednesday in conjunction with CUNA's America's Credit Union Conference, spreading credit unions' "Unite for Good" message to a nationwide television audience.
 
5. Report Debunks Myth Of The Uneven Playing Field
 
FEDERAL WAY, Wash. (6/7/13)--All of the major claims made by critics of credit unions in terms of uneven playing field  are unsubstantiated, says an economic analysis released today. What's more, there is "no evidence that state and federal tax policies give credit unions unfair competitive advantages over banks."
 
4. NCUA Plan Would Limit Loan Participations To 25% Of Net Worth
 
ALEXANDRIA, Va. (6/18/13)--A final rule on loan participations has been added to the National Credit Union Administration's June open board meeting agenda.
 
3. CFPB Overdraft Report Out: Study Will Continue
 
WASHINGTON (6/11/13)--Consumer Financial Protection Bureau Director Richard Cordray states clearly in the bureau's report on financial institutions' overdraft programs, released at midnight, that the bureau does not intend to impede the offering of this service. The Credit Union National Association was among stakeholders included in an early briefing on Monday and CUNA President/CEO Bill Cheney had a personal call from Cordray.
 
2. NCUA Approves Loan Participation Rule
 
WASHINGTON (6/20/13)--The National Credit Union Administration's final approved rule on loan participations implemented a number of changes sought by the Credit Union National Association and is now a much more workable framework for credit unions to utilize loan participations, said CUNA President/CEO Bill Cheney.
 
1. Senate Finance Committee's 'Tax Options' Paper Notes CUs
 
WASHINGTON (6/13/13)--The release today of the Senate Finance Committee's "tax options" paper on exempt organizations--with the elimination of the credit union tax status written clearly in black and white as a reform option--should be a wake-up call for action by credit unions, Credit Union National Association President/CEO Bill Cheney said in immediate response to the paper's release.

Court Dismisses NCUA Lawsuit Over Corporate CU Losses Vs. Barclays

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WICHITA, Kan. (7/11/13)--Saying that the claims are time-barred, a federal court in Wichita, Kan.,Wednesday afternoon dismissed the National Credit Union Administration's lawsuit against  Barclays Capital over the sale of residential mortgage-backed securities (RMBS) that caused losses to U.S. Central FCU and Western Corporate FCU.
 
Also, in a separate ruling Wednesday, U.S. District Judge John W. Lungstrum reaffirmed an earlier ruling he made in a similar lawsuit filed by NCUA against Credit Suisse Securities: that a tolling agreement NCUA had entered into with the defendants, and which NCUA had argued extended the time allowed to file the lawsuits, "is not effective in extending the applicable three-year limitations period under the Extender Statute."
 
NCUA told BloombergBusinessweek yesterday afternoon it couldn't comment immediately on the decision.
 
The agency had filed eight cases against brokerage firms charging that they made misleading statements about the securities they sold to the corporates. The Barclays case addressed $555 million in securities ranging from $12.515 million to $200 million in 12 certificates sold between Oct. 15, 2006, and June 12, 2007, according to the ruling.
 
NCUA argued in all cases filed in the U.S. District Court in Kansas and other districts that it had met the statute of limitations for filing the lawsuits because of tolling agreements that delayed filing dates or because of a statute that extended the time to file in certain situations.
 
"The court reaffirms here the rulings that it issued in the Credit Suisse case concerning the application of that statute," said Lungstrom in the Barclays ruling. "Accordingly, absent some form of tolling, plaintiff was required to file these claims by March 20, 2012, three years after its appointment as conservator for U.S. Central and WesCorp.  Plaintiff did not initiate this action, however, until Sept. 25, 2012," he said.
 
"Nor may plaintiff rely on the Extender Statute's alternative reference to the applicable state-law limitations periods, as this case was filed more than five years after the purchases of these certificates," he said, adding "all of the claims...this action are time-barred, and the plaintiff's complaint is hereby dismissed in its entirety."
 
In Wednesday's Credit Suisse ruling, the court reaffirmed its April 8 dismissal of some of the complaints as time-barred and ruled "that plaintiff may not rely on [the tolling] agreement to avoid application of the Extender Statute's limitations period."
 
The dismissal, if upheld by higher courts, likely will impact not only NCUA's lawsuits but those of other agencies trying to recoup losses from RMBS investments. The Credit Suisse ruling specifically mentioned an amicus brief filed by the Federal Deposit Insurance Corp. and rejected the FDIC's arguments, which were similar to NCUA's.

Oregon Legislative Adjournment Ends CU Tax Bills

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SALEM, Ore. (7/11/13)--The Oregon Legislature adjourned Monday, putting an end to the consideration of bills that would tax credit unions, said the Northwest Credit Union Association.

During the legislative session, the Oregon Bankers Association put together a targeted anti-credit union effort, based on the work done by an anti-credit union task force established last summer, said NWCUA (The Anthem July 9).

The bank lobby supported three anti-credit union bills --HB2484, 2485, and 2486--aimed at taxing many credit unions and implementing new burdensome regulations. Not one of the bills received a hearing in the legislature, even after some editorials called for at least a hearing, NWCUA said.

"We just finished our long session, and all the bills that didn't make it are considered dead," Pamela Leavitt, NWCUA legislative policy adviser for Oregon advocacy and grassroots, told News Now. Those bills would have to be reintroduced in the state legislature's February short session, which lasts 35 days, Leavitt noted, adding she is unaware of any bankers' plans.

"We not only defeated [the bills], we feel we were very successful in defending credit unions," Leavitt said. "We will continue to be prepared to confront taxation and any regulatory bills."

NWCUA will continue to talk to the state legislature, she added. "We have a very progressive advocacy agenda," she explained. "We will continue to meet with legislators and talk to them about the value of the credit union charter."

The 2013 session will be considered one of the most successful in history for credit unions, NWCUA said.

Oregon Gov. John Kitzhaber on June 24 signed SB520, a bill to update the Oregon Credit Union Act. The NWCUA-backed bill was the result of recommendations by the Oregon State Model Act Subcommittee, chaired by Scott Burgess, president/CEO of Rivermark Community CU in Beaverton, and will make several changes to the Oregon Credit Union Act. The changes will take effect Jan.1.